Bitcoin Investment Strategies Even though Bitcoin investment has become very popular recently, people who invest in Bitcoin aren’t limited to Bitcoin cryptocurrency. Other Bitcoin investment strategies include:
Trading Bitcoin
Bitcoin is traded both on the exchanges and in OTC (over-the-counter) markets where people can buy and sell large amounts of Bitcoin without having an effect on the current Bitcoin market price. Bitcoin Revolution is one of the favorite platforms of bitcoin traders that are successful in the bitcoin market.
Investing in Cryptocurrency Companies
New companies are emerging that allow you to invest in various types of cryptocurrencies or build new cryptocurrencies from scratch. Some companies such as Ethereum provide their own cryptocurrency while others such as First Bitcoin Capital Corp. trade publicly on unregulated stock exchanges, which means they must meet all applicable Canadian & US laws & regulations.
Investing in Blockchain Technology
Blockchain technology has become popular recently because it allows for trackable transactions between two people without the need for a centralized clearinghouse or bank. Bitcoin’s blockchain is public to all Bitcoin users which makes Bitcoin more transparent than traditional currency. Since Bitcoin is completely decentralized, it allows for transactions to take place between two parties directly due to its peer-to-peer (p2p) nature. If you were to buy Bitcoin in Canada, this transaction would be sent through one of many bitcoin cryptocurrency wallets and stored securely on the Blockchain network. Many financial institutions are currently researching ways in which they can use blockchain technology because it provides transparency and security at a lower cost than other technologies.
Current Bitcoin Regulation Bitcoin has become increasingly popular lately but still lacks proper regulation in most countries around the world. At the time of writing, there is no Bitcoin regulation in Canada because Bitcoin is not considered a currency. Bitcoin has been deemed a commodity by the Canada Revenue Agency (CRA) which means Bitcoin transactions are subject to capital gains tax. Bitcoin taxation rules depend on whether you make a profit or a loss from Bitcoin transactions.
Bitcoin & Income Tax
Bitcoin income tax is required when you buy Bitcoin, sell Bitcoin for CAD, and if the price changes drastically between the time of your purchase and sale. You must calculate your total capital gain or loss as well as any taxable benefits such as claiming buying Bitcoin as a home office expense.
Bitcoin & Sales Tax
There is no sales tax on buying Bitcoin in Canada but there may be sales tax on selling Bitcoin depending on where you live. Bitcoin income tax rates are the same as Bitcoin sales tax rates which means Bitcoin is taxed at 0% if you live in British Columbia or Quebec but Bitcoin could be subject to a Federal Goods & Services Tax (GST) rate of 5%. Bitcoin mining will soon be subject to GST/HST so Bitcoin is now considered taxable property.
Bitcoin & Capital Gains
If you buy Bitcoin, hold it for over one year, and then sell it at a higher price than your original purchase price, any capital gain earned on the sale would not be an “eligible capital gain” which means you would need to claim your Bitcoin investment as income on your taxes just like any other type of investment. On the other hand, if you held Bitcoin for less than a year before selling your Bitcoin, you would not have to claim Bitcoin as income on your taxes. Bitcoin is treated the same way as stocks in this regard.
Bitcoin & Gifts
Bitcoin can be given as a gift but any tax benefits from Bitcoin transactions depend on who you give Bitcoin to and how long they hold Bitcoin for. If you buy Bitcoin and give it to somebody in your family or if somebody buys Bitcoin from you at a drastically lower price, there could be tax implications when claiming these transactions.
Bitcoin & Gambling Winnings
If you bought Bitcoin and then spent it at an online casino, there could be tax consequences down the road because of potential gambling winnings . In many countries around the world including Bitcoin is considered gambling winnings and Bitcoin tax rates vary from 0% to 50%. A Bitcoin casino will typically pay your Bitcoin tax for you but it is up to you to report Bitcoin gambling income on your taxes later.
Bitcoin & Donations
You can also make Bitcoin donations and receive a charitable donation receipt similar to donating stock . If the value of Bitcoin goes up after receiving the donation, you would not have to claim this amount as capital gains when filing your taxes because Bitcoin is treated like other types of non-cash donations. Traditional cash contributions are only deductible if they were made in Canadian Dollars whereas Bitcoin tax deductions work no matter what currency you used.
